In the tumultuous geopolitical landscape of today’s Middle East where interests and alliances rapidly change, and friends are easier lost than made, Turkey and Qatar have their sound partnership.
Ankara and Doha maintain similar positions with respect to developments in the post-Arab Uprising period. They have much common ground on Syrian civil war with the objective of unseating the Bashar al-Assad regime as a prerequisite for peace, and due to their policies towards those ends, they are frequently accused of stirring sectarian tensions and extremism in the region.
While these two countries’ strategies are increasingly falling short of meeting their expectations in Syria, the past few weeks have brought a number of initiatives cementing their relationship at the bilateral level.
The military cooperation agreement signed last year found its concrete expression earlier this month when Turkey was announced to be building a military base in Qatar. Accommodating three thousand Turkish troops supported by aerial and naval assets as well as special operations units, this base will form a major concentration of military power in Qatar next to the Al Udeid Air Base operated by US Armed Forces.
The announcement of a Turkish military base in Qatar was accompanied by the powerful symbolism of a friendly match played by the national soccer teams of Turkey and Qatar in Doha. The match, which the Turks won 2-1, provided a sports diplomacy momentum to the ongoing political and security rapprochement between the two countries, while at the same time confirming Turkey’s support for Qatar, whose hosting of the 2022 World Cup is facing criticism from the international community due to concerns about the country’s suitability as a host.
A shared ideology based on a Sunni interpretation of Islam can be said to be forming Ankara and Doha’s alliance with respect to Syria and Middle Eastern politics in general and fueling the current rapprochement at the bilateral level.
While there is certainly more than a grain of truth to it, there also exists a solid economic base to the whole process, which was strengthened by this week’s announcement of Qatar National Bank’s (QNB) deal buying a Greek-owned Turkish bank. Qatar is now not only a market for Turkey’s goods and services, a supplier of gas and a source of capital flows to the Turkish economy, but also an owner of major assets in Turkish banking industry.
QNB, half owned by Qatar’s sovereign wealth fund, is going to pay $2.94 billion for a 99.8% stake in Turkey’s Finansbank, which has around 650 branches in Turkey and abroad, more than five million customers and $19.5 billion in loans. The National Bank of Greece had purchased the bank back in 2006, and since this takeover, Finansbank is known to have grown threefold in terms of balance sheet size and the number of branches. Now, despite the financial success of the bank over the past years, the Greek side is forced to make the sale as a condition of its bailout over the debt crisis.
QNB’s takeover has not been finalized yet, it is subject to parliamentary ratification on both sides, however when the deal is concluded (most likely some time over the first half of 2016) it will make Qatar a major player in Turkey’s banking industry as the owner of one of the largest of 30 banks with foreign capital in the sector.
The impact of QNB’s takeover of Finansbank is likely to have a greater impact on the Turkish economy than it appears at the first sight. Turkey is suffering from a current account deficit, which stood at an annualized rate of $38.1 billion as of last October, according to the latest data released by Turkey’s Central Bank.
A major cause of Turkey’s current account deficit is the energy-poor country’s dependence on the imports of hydrocarbons to fuel its energy needs. At the same time, Turkey increasingly relies on capital inflows from abroad, which comes predominantly in the form of portfolio investment, to finance its deficit. On both counts, Ankara expects Qatar to play a greater role in supporting Turkey’s economy, and there is no better tool than a Qatari-owned Turkish bank for facilitating this process.
In terms of the import of hydrocarbons, Turkey is currently facing a bottleneck due to its recent (and escalating) standoff with Russia, a country that is providing 60% of Turkey’s natural gas.
Earlier this month, as part of its efforts to diversify energy sources, Turkey’s state-owned energy company Botaş signed a preliminary agreement with Qatar’s national petroleum company to purchase liquefied natural gas (LNG) over a long-term period. The QNB-Finansbank deal, when finalized, can play a crucial role in the financing of Turkey’s purchase of LNG from Qatar.
Qatar is also a major source of cash inflows for the Turkish economy. During the first half of 2015, money coming from Qatar into the Turkish system totaled $350 million, making Qatar the fourth largest source in this respect after Russia, the Netherlands and China. There is every reason to expect Finansbank, with its new ownership, to pull the volume of Qatari capital entering into Turkish economy to higher levels.
The QNB-Finansbank deal is also expected to facilitate the bilateral trade between the two countries. The goods trade is not huge in terms of volume, but increasing steadily. In 2014, the two-way good trade between Turkey and Qatar amounted to $740 million, representing a more than 13-fold increase since 2004 when the volume of trade was a weak $53 million. From the Turkish perspective, it is the services trade that matters much more, particularly the trade in construction services.
Those who watched the Qatar-Turkey soccer match might have realized that a large majority of the Turkish fans in Doha’s Abdullah bin Khalifa Stadium were employees and workers of Turkish construction companies undertaking contract projects in Qatar.
According to data released by the Turkish Contractors Association, Turkish companies have so far completed 118 major projects in Qatar with a total value of $11.6 billion, which makes Qatar the third largest market in the Middle East and the eighth largest in the world for Turks. The QNB-Finansbank deal is likely to create new financing opportunities for Turkish construction companies doing business in Qatar.
Turkey and Qatar are perhaps the best of friends for each other in the Middle East. Identities, political and ideological postures are certainly playing a role here. But at the same time, who does not like friends with money?
Dr. Altay Atlı is a lecturer at the Asian Studies program of Boğaziçi University in Istanbul and a senior research fellow at Turkey’s International Strategic Research Organization (USAK).
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